CFBP, LLC v. Wells Fargo Bank, National Association
ORDER granting U.S. Bank, National Association's 30 Motion to Sequester Rents. Signed by Judge Virginia M. Hernandez Covington on 5/2/2011. (SAL)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
Case No. 8:09-cv-2322-T-33AEP
U.S. BANK, NATIONAL ASSOCIATION,
U.S. BANK, NATIONAL ASSOCIATION,
Third Party Plaintiff,
Third Party Defendant.
This matter is before the Court pursuant to defendant/counterplaintiff U.S. Bank, National Association’s Motion to Sequester
Rents (Doc. # 30), filed on October 11, 2010.
defendant CFBP, LLC filed its Verified Response in Opposition (Doc.
# 33) on October 29, 2010.
For the reasons that follow, the Motion
U.S. Bank moves this Court to issue an order sequestering the
rents collected by CFBP from the real property that is the subject
of U.S. Bank’s commercial mortgage foreclosure counterclaim. (Doc.
# 30 at 2).
According to U.S. Bank, CFBP defaulted under the
depositing certain insurance proceeds into [CFBP’s] bank account
and (2) failing to make its debt service payment due January 11,
2010 and all payments due thereafter.”
U.S. Bank asserts that pursuant to the parties’ mortgage and
security agreement dated February 21, 2007, and an assignment of
leases and rents also dated February 21, 2007, CFBP pledged and
assigned all rents from the real property to U.S. Bank as security
for payment of a note.
Id. at 3.
Section 1.2 of the mortgage and
security agreement provides:
ASSIGNMENT OF RENTS. Borrower hereby absolutely and
unconditionally assigns to Lender Borrower's right,
title and interest in and to all current and future
Leases and Rents; it being intended by Borrower
that this assignment constitutes a present,
absolute assignment and not an assignment for
additional security only. Nevertheless, subject to
the terms of this Section 1.2 and Section 3.6,
Lender grants to Borrower a revocable license to
collect and receive the Rents, which license shall
be automatically revoked upon the occurrence of an
Event of Default (as hereinafter defined).
Borrower shall hold the Rents, or a portion thereof
sufficient to discharge all current sums due on the
Debt, for use in the payment of such sums.
(Doc. # 1-2 at 7). On February 16, 2010, after CFBP’s alleged
default, U.S. Bank sent CFBP a written notice demanding that the
rents be paid to U.S. Bank.
(Doc. # 30 at 3).
In contrast, CFBP asserts that it is not in default of the
mortgage and security agreement because U.S. Bank committed the
first material breach of the agreement by refusing to release
Alternatively, CFBP requests that the Court order the sequestration
of rents only for the projected annual property taxes and property
insurance from February 16, 2010, to present in the amount of
(Doc. # 33 at 5-6).1
$25,000 per month.
In this diversity case, the Court applies the substantive law
of the forum state- here, Florida- unless federal law compels a
Technical Coating Applicators, Inc. v. United
States Fid. & Guar. Co., 157 F.3d 843, 844 (11th Cir. 1998).
Court must apply Florida law in the same manner that the Florida
Supreme Court would apply it.
See Brown v. Nichols, 8 F.3d 770,
773 (11th Cir. 1993).
sequestration of rents prior to the final adjudication of a
Unless the lender and borrower have a written
agreement to the contrary, an assignment of rents provision becomes
enforceable upon the borrower’s default and the lender’s written
demand for the rents.
Fla. Stat. § 697.07(3).
statute provides that “a court of competent jurisdiction, pending
Relatedly, on April 18, 2011, CFBP submitted an unauthorized
supplemental response to the Motion. (Doc. # 55). Pursuant to
Local Rule 3.01(c), “[n]o party shall file any reply or further
memorandum directed to the motion or response . . . unless the
Court grants leave.” As CFBP neither sought nor received leave to
file its supplemental response, the Court hereby strikes the
pleading for failure to comply with the Local Rules.
final adjudication of any action, may require the mortgagor to
deposit the collected rents into the registry of the court, or in
such other depository as the court may designate.”
Fla. Stat. §
CFBP argues that a court may refuse to compel the deposit of
rents pending final adjudication where it determines that there is
a bona fide dispute between the parties as to whether the borrower
is in default of the mortgage, Whud Real Estate Ltd. P’ship v. Oak
Grove, Ltd., 699 So. 2d 842, 842-43 (Fla. 3d DCA 1997), and where
the court determines that the borrower presents a strong defense to
the foreclosure action.
Nat’l Loan Investors, L.P. v. Joymar
Assocs., 812 So. 2d 582, 582 (Fla. 3d DCA 2002).
that because U.S. Bank allegedly committed the first breach of the
parties’ mortgage and security agreement, CFBP is discharged from
its liability under the agreement.
(Doc. # 33 at 2-3).
CFBP fails to submit any support for the application of this
general contract theory in the context of a mortgage and security
The parties’ mortgage and sale agreement provides for the
assignment of rents.
(Doc. # 1-2 at 7).
Pursuant to Florida
Statute section 697.07(3), the assignment of rents provision became
enforceable upon CFBP’s default and U.S. Bank’s February 16, 2010,
written demand. Fla. Stat. § 697.07(3). The Court therefore finds
that the provisions of Florida Statute section 697.07 have been
In order to preserve the rents until the claims at issue can
be determined, the Court determines that it is appropriate to
sequester the rents.
The only remaining determination is the amount of rents to
While CFBP argues for less than full sequestration of
the rents, U.S. Bank notes that the parties’ agreement designates
that CFBP “absolutely and unconditionally assigns to [U.S. Bank]
[CFBP’s] right, title and interest in and to all current and future
Leases and Rents . . . .”
(Doc. # 1-2 at 7)(emphasis added).
Pursuant to the parties’ agreement and Florida Statute section
697.07, the Court requires CFBP to deposit into the registry of the
Court within seven days of the date of this Order all rents in its
possession or control at the time of U.S. Bank’s February 16, 2010,
demand to the present date.
In addition, CFBP shall deposit into
the registry of the Court within seven days after receipt of such
rents all rents collected hereafter, less payment of any expenses
authorized by U.S. Bank in writing.
At this juncture, the Court
will not require CFBP to file monthly reports accounting for the
disposition of the rents.
However, should it become necessary
because rent payments are not made, or should other issue arise,
CFBP may be directed to file monthly reports with U.S. Bank.
Accordingly, it is
ORDERED, ADJUDGED, and DECREED:
U.S. Bank, National Association’s Motion to Sequester Rents
(Doc. # 30) is GRANTED.
Within seven days of the date of this Order, CFBP shall
deposit into the registry of the Court all rents in its
possession or control at the time of U.S. Bank’s February 16,
2010, demand to the present date.
CFBP shall deposit into the registry of the Court within seven
hereafter, less payment of any expenses authorized by U.S.
Bank in writing.
At this juncture, the Court will not require CFBP to file
monthly reports accounting for the disposition of the rents.
However, should it become necessary because rent payments are
not made, or should other issue arise, CFBP may be directed to
file monthly reports with U.S. Bank.
DONE and ORDERED in Chambers, in Tampa, Florida, this 2nd day
of May, 2011.
All Counsel of Record